TA Tuesday: BTC and ETH Decline Amid Broader Market Optimism

Week-over-week performance:

  • BTCUSD: 67,753 / -4.85%
  • ETHUSD: 3,839 / +4.46% (!)
  • US10Y: 4.46% / +2 bps
  • DXY: 104.43 / -0.14%
  • GOLD (USD/OZ): 2,352 / -2.61%
  • SPX: 5,304 / -0.07%
  • NDX: 18,808 / +0.72%
  • DVOL: 54.63 / -7.53%
  • VIX: 11.92 / -1.81%

Looking Ahead – Economic Calendar

  • Wednesday, 29 May: DE CPI, Beige Book
  • Thursday, 30 May: CH GDP, US GDP, US Jobless figures
  • Friday, 31 May: EU CPI, US PCE

On the macro side:

The macro-outlook remains stable week-over-week, with no significant news impacting the market.
The target rate probabilities for the Fed meeting on 18 December 2024 continue to indicate a preference for a 500-525 bps target rate, suggesting a single 25 bps cut by the end of the year. Nevertheless, steady equities, a lower VIX, declining gold prices, and a weaker DXY support my bullish stance on risk assets.
Especially, as long as we have weeks without any leading macro news.

Chart 1: Target Rate Probabilities for the Fed Meeting on 18 December 2024 (Comparison: Today vs. One Week Ago)

On the FX side:

The DXY is stabilising within the 104.2 – 105.2 range, which is positive for risk assets.
Although the interest-rate differential between the USD and other G10 currencies may widen, I do not anticipate significant outperformance by the USD in the short term, which reinforces the bullish outlook for risk assets.

Regarding EURCHF, we are approaching a crucial week with upcoming releases of Swiss GDP and EU CPI data.
Given the year-to-date gain of 6.91%, I expect the SNB to gradually reduce its support for the euro.
It is likely that the ECB will follow the Fed’s lead on rate cuts.
While I still aim for parity, it is prudent to lock in some profits now, which has led me to reduce my net-long position.

On the crypto side:

On 23 May, the SEC approved Form 19b-4 for eight spot ETH ETF issuers, including BlackRock and Fidelity.
Trading cannot start until the S-1 forms are approved, with a timeline of up to three months.

The SEC requires issuers to use cash, not actual ETH, to create ETF shares.
Issuers cannot stake ETH held in the ETFs, leading investors to miss out on potential 5% annual staking rewards, which is likely to reduce demand.
As the SEC becomes more crypto-friendly, staking-inclusive ETF products may be introduced, boosting appeal and demand.

Currently, the ETH staking ratio is 27%, much lower than other protocols (SOL 63%, ADA 65%).
An increase in staking, combined with assets locked in ETFs, could lead to a supply shock in ETH.

Despite ETH’s market cap being just 35% of BTC’s, similar BTC inflows could shift to ETH, with a 20% bias.
The Grayscale ETH Fund ($ETHE) holds USD 2.93 million ETH (AuM USD 11 billion), with most of it coming from turbo-leveraged carry trades by hedge funds.
This, coupled with a 2.5% management fee will see even larger outflow than the GBTC as soon as the ETF starts trading.

ETH CME open interest is nearing all-time highs, showing institutional interest.
Expect aggressive moves; stay alert to headlines and buy on dips. Support is at USD 3,600-3,700, with resistance at USD 3,900-4,000.

I expect consistent buying interest in ETH (and ETH beta names like ENS, LDO, PENDLE) compared to BTC as we approach the ETH ETF trading day.

For BTCUSD, support is at USD 67,000 and resistance at USD 72,000.

Chart 2: BTCUSD 1d

In other news Mt. Gox started moving USD 6 billion in BTC to a new wallet, the first movement in five years.
Mt. Gox owes creditors 142,000 BTC (USD 9.6 billion) and 143,000 BCH (USD 66 million), due by 31 October 2024.
The market reacted to potential sell pressure from creditors receiving payments.

By the way, I remain structurally long biased.

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